The Department of Labor is mulling an exemption to allow UBS Group and Credit Suisse Group to continue providing asset management services to U.S. retirement plans, as the two major financial firms finalize a merger.
The exemptions for qualified professional asset managers, known as QPAMs, are required whenever a money manager's affiliates or parent is convicted on criminal charges. Over the past decade, entities within both firms have been convicted of financial wrongdoing.
In March, Credit Suisse and UBS agreed to merge after turmoil in the Swiss banking system. As the acquirer, UBS will add about $6 billion to its U.S. retirement plan assets, according to data compiled by Pensions & Investments. The merger is expected to close by the end of May, the Labor Department noted in its proposed exemption Thursday.
Neither bank filed a QPAM application with the Labor Department, "due to the exigent circumstances giving rise to the merger," the department said in the proposed exemption. Under the exemption, UBS would have to provide the department with a written report every 120 days following the merger containing information including the extent to which the Credit Suisse QPAMs have been integrated into UBS' operations, and detailed information regarding the costs to ERISA-covered plans and individual retirement accounts that would arise if the exemption were not renewed.
The exemption would be good for one year beginning on the date of the merger. But the department cautioned covered plans that it will not extend the exemption unless, among other things, UBS submits an application with detailed written information substantially in advance of the expiration of the one-year term so the department can determine whether an extension is in the interest and protective of affected plans, and administratively feasible.
"The terms of this proposed one-year exemption have been designed to permit plans to terminate their relationships with the affiliated QPAMs and the related QPAMs in an orderly and cost-effective fashion in the event of an additional conviction or a determination by a plan that it is otherwise prudent to do so," the department said.
Written comments on the proposed exemption are due May 18. "The department notes that this proposed exemption's abridged notice and comment period is due to the exigent circumstances that are necessitating the merger and the fact that the parties to the merger have existing QPAM exemptions in place," the department said.
A UBS representative could not immediately be reached for comment.
The QPAM exemption was created in 1984 and allows institutions to engage in transactions involving U.S. retirement assets from 401(k) plans, individual retirement accounts and corporate pension plans that are otherwise prohibited under the Employee Retirement Income Security Act.
The Labor Department in July unveiled a proposed amendment to modify its QPAM exemption by, among other items, expanding the types of misconduct that disqualify financial institutions from using the exemption.
